Buffett & Munger discuss Jeff Bezos, Amazon, retail, Cloud, customer service, delighting customers, customer loyalty, short term thinking v “nobody wants to get rich slow.” Buffett’s advice to Bezos.
[00:00:00] He must because he thinks he can do anything. I'd rather be around them so somehow some limit to yourself. You think this debate knows the limits of his skills. Way better than you think. Bezos is utterly brilliant and utterly remorselessly ambitious.
[00:00:21] I would I would never believe him. Jeff. Do you ever meet him.
ValueWalk's Raul Panganiban interviews Dan Pipitone, co-founder of TradeZero America, and discusses his recent study on retail investing trends. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with TradeZero America's Dan Pipitone ValueWalk's ValueTalks ·
[00:00:28] Yeah it says morrow morning. When you look in the mirror after you've gotten up just right. Put it in lipstick or whatever you want on the mirror and just put it. Like my customer not satisfy my customer delight my customer the.
[00:00:50] Any business that has delighted customers as their sales force out there that you don't have to pay.
[00:00:57] You don't see them but they're talking to people all the time. Your customers are going to get to vote. They're going to get to talk. And you want them out there. As salesman for you and they will be if you don't like them. The classic example. Jeff Bezos. I mean here's a fellow that 20 years ago had a very very very small business but he set out every day to the ideas customer by way of past delivery by lower prices whatever it took. And today he is thinking about how to further delight his customer. He'll never quit. And you you will succeed if you have delighted customers so don't settle for out of that opportunity to have lunch with Warren Buffett and Jeff Bezos. And I asked.
[00:01:42] Jeff Bezos a question to me about Warren Buffett. I said Jeff in front of Warren. What's the best advice that Warren Buffett ever gave you. And he says One day I called Warren Buffett and I say Warren like you're like the second richest guy in the world. Do you like the they're talking. And he's like. Your investment thesis is so simple. Like if you're the second richest guy in the world. That's my thesis so simple like why isn't anyone just copying you. And Warren Buffett replies he goes. Because no one wants to get rich slow.
[00:02:11] Berkshire is not going to outpace us. Jeff Bezos for sure what you mean by that what we are talking about.
[00:02:16] There are certain people that you do not want to try and be that their own game and you're actually Jeff Bezos would be number one. I mean that be like me playing chess with Bobby Fischer 40 years ago it would be all over the first movie. JEFF No he's just shown amazing talent in figuring out how to please customers. And it ended in a very short time.
[00:02:44] And what's interesting to some extent about him the same things. Interesting about Fred Smith of Federal Express. It isn't that they've had some breakthrough in some molecule that are or come up with some incredible invention. They've taken a fairly ordinary thing. I mean starting buying books getting them. You know. But Fred Smith took airplane in the delivery truck and the Postal Service. But then he just put it together in a very imaginative way know the central hub and all that. And came up with a whole new industry out of components that were known to everybody. And in a sense Bezos has done the same thing now he's building big distribution centers and employing the latest technology. But the Kindle came out of there and there are some products. But overwhelmingly he's taken things. You and I were before and he's figured out a way to make us happier buying those products either by fast delivery or prices or whatever it may be. And that's remarkable when you think about it all he thinks about is the he wants the customer to have a smile on their face and an now that's been true of other retailers. I mean that is not something that Rich didn't think or Marshall or Bernard Gimbel were all these people but he knew how to do it.
[00:04:01] You know in 1997 in a way that nobody else would come up with and I'm sure his ideas even evolved as he was doing it. But he laid out his objectives in his first annual report. And you could your read up on I mean his competitors could read them and he has changed the world in a big way.
[00:04:19] When you talk about his game and it's harder and harder to really identify what retailing it's online retailing but so much of Amazon's huge profits from the last go around came from a WS from the cloud.
[00:04:33] And that's incredible because he he developed that over a six or seven year period and everybody else that watched him and here was a guy that was a business genius and he's coming out with something big and the world there's competitors to a large extent just sort of ignored him. I mean they gave him a lead time which was very very dramatic. I actually sat next to him at a birthday party for someone told me how surprised he was that that he didn't get more reaction Korkor.
[00:05:08] As far as the suppliers Wal-Mart is really cracking down. How does that change your opinion of Wal-Mart or your relationship with the company.
[00:05:17] Well I understand why they do. They're doing that. And in significant part I'm sure in reaction to Amazon I mean they I believe the Wal-Mart online business and this may be world wide I'm sure about that picture but you know we're talking 12 to 14 billion dollars. You're talking about Amazon having annual gains of numbers like that. So it was very just just as Wal-Mart was totally underestimated by the Sears was the time and everything. I mean people the idea that some guy in Bentonville with a pickup truck was going to take them to the cleaners know they was beyond their thinking and I'm sure that that was the situation at first with traditional retailers and Amazon. You want to be underestimated. The game and both of those guys came in under the radar screen. But Wal-Mart actually with their own history and then seeing what was going on at Amazon knows they have to play big in e-commerce and they have certain advantages in having stores all over the country which can act as pickup spots and that sort of thing. But they're under a lot of pressure. You were running Wal-Mart. You looked out five or 10 years and you saw what Amazon was doing. It would feel that the time to go after him was about 10 years from now but now. And so I think partly in response to that a year or so ago they might be a little less. They want to I think probably all are suppliers pretty much in and in a number of different arenas.
[00:06:49] So we want to tighten up the term in terms of pricing or in terms of allowances for warehousing or in terms of dates of payment.
[00:06:58] They've got a tough competitor with Amazon. He said we needed the Internet. Somebody else spent billions of dollars developing it but it wouldn't have worked without the Internet. He said we needed transportation. Somebody else had already built railroads and U.P.S. and all of that sort of thing and they said we needed payment systems that would take billions of dollars to build. But that had already been done by Vaessen known all along. And so he took. Three huge requirements with the older guys and spent the money and then he combined them in a way that he didn't have to spend the money you have and then really and I can get credit for that.
[00:07:30] You have talked extensively over the last several days even the last several months about how Jeff Bezos has the best business leader you think we have right now in the United States about how Amazon is a brilliant company.
[00:07:43] And now you're talking about how it's one of five companies that take no capital to continue to build. How come you don't buy shares of Amazon stupidity.
[00:07:54] I was impressed with Jeff early. I never thought he could pull off what he did. I mean I thought he could pull off something.
[00:08:00] But on the scale that has happened I mean it's changed your behavior your knowledge it changed everybody in the officers behavior. And the remarkable thing about Jeff and everything else is that he's done it to enter industries almost simultaneously that really don't have that much connection. I've never seen a person develop two really important industries at the same time and really the the operational guy at both and he's done a good job with the Washington Post on the side just personally. But but here you take cloud services. I mean he. Was the Charlie Rose show on this that he did three or four months ago. He thought he would have two years of runway. He got seven years. You do not want to give Jeff Bezos a seven year start to the competitors in any other races. So the same time he's the bell is shaking up the whole retail world is also shaking up the. World.
[00:08:56] And you know I take my hat off to him by not buying shares right now it's suggests that you think maybe they're too rich. Or is it that you don't understand the company's valuation.
[00:09:07] It's a big valuation. It's very hard when you say something whatever the price to buy it. But. We do it occasionally. And you know we're talking now about getting multiples from the hundreds of billions. But if you if you told me. That you were going to shoot me at the end of. 10 years if. This. If a short were better. I would take the long side. You know I'm not buying any but the these are powerful powerful ideas with big potential. And he's executed what's really fascinating is that. Amazon which I've never seen a guy succeed.
[00:09:56] In two businesses almost simultaneously that are really quite divergent in terms of customers and you know all of the operations you're talking about Amazon's shopping business and Amazon's business. I mean Jeff Bezos I do think is the most remarkable Businessperson of our. So the core to you and. To succeed. In two different big businesses. In a huge way. Is Really I can't think of another example like it. And he talked on Charlie Rose about three months ago which was really good. He talked about how. In the cloud he. Thought that maybe get a two year on mind on a seven year on. So he's a tough competitor.
[00:10:41] So you have some very smart people competing and really remarkable. And I was asked Charlie whether you could think of a situation like that. Where. One person has. Built an extraordinary. Economic Machine and two really pretty different industries.
[00:11:04] You know almost simultaneously as has happened from a standing started zero from a standing start as there were other competitors with lots of capital and everything else to do it in retailing and to do it with the cloud. Jeff Bezos as Don. I mean I I mean people like the Mellons invested in a lot of different industries and all of that. But he has been in effect the C O simultaneously of two businesses starting from scratch. That is. You know Andy Grove used to use that Intel used to say you know think about if you had a silver bullet and you could shoot it up and get rid of one of your competitors who would it be. Well. I think that bolt in the cloud and then retail. There are a lot of people that would aim that silver and Jeff and he's done in a different sort of game.
[00:12:00] But he's know the Washington Post he's played that hands as well as anybody I think possibly could. So it's a remarkable business achievement where he's been involved actually in the execution not just bankrolling of of two businesses that. That. Probably is feared by their competitors almost as you can find.
[00:12:26] Charlie you come across well we're sort of like the Mellons old fashioned people who done all right. And Jeff Bezos is a different species.
[00:12:41] And we missed it entirely and said that we never owned a share of Amazon the development you refer to is huge.
[00:12:48] I mean really he owes you and it isn't just Amazon but Amazon is a huge part of it.
[00:12:56] And they what they've accomplished. And in a very short period of time and continued accomplishes remarkable the number of satisfied customers they developed.
[00:13:08] And we don't make any decision involving even the manufacturing of goods that retailing whatever it is without thinking on and hard about what the world will look like in five or 10 or 20 years without powerful trend really hugely powerful trend that you just described. So we're not we don't look at that as something where we're going to try and beat them at their own game. They're better than we are about them. So Charlie and I are not going to base that as Bezos by a long shot but we are going to think about that.
[00:13:50] It does not worry us obviously with the precision cast. It doesn't it doesn't worry us in terms of the overwhelming majority of our businesses but it is a huge economic trend that 20 years ago was not on anybody's radar screen and lately has been on everybody's radar screen and many of them have not including us and in a few areas have not figured the way to either participate in it or to counter it. The nature of capitalism as somebody is always trying to offer if you've got some good business there I was trying to figure out how to do them take it away from me and improve on it. And and the effect I would say just give Amazon but others that are playing the same game the effect on an industry full of factors is far from having been seen I mean it is it is a big big force and that world already has disrupted plenty people and that it will disrupt market I think think Berkshire Berkshire is quite well situated for one thing.
[00:15:12] We have one big advantage we have is we didn't ever see ourselves starting out at one industry and we didn't go and we went into department stores but we didn't think of ourselves as departments are the guys that we didn't think of ourselves as steel geyser or tire guys or anything else. So we thought of ourselves as having capital allocate. If you start with in a given industry focus and you spend your whole time working on a way to make a better tire or whatever it may be I think it's hard to have the flexibility of mind that you have if you just think you have a larger hopefully large and growing part of capital hill trying to figure out what is the next best next move that you can make with that capital. I think we do have a real advantage that way. But I think you can follow that the Amazons would manage to have this intense focus on having hundreds of millions of us generally very happy customers getting very quick delivery or something. They want to get promptly and they want to show the way that they are shopping. And if I owned a bunch of shopping malls or something like that that would be who would be thinking hard about what they might look like 10 or 20 years from now.
[00:16:35] And our biggest retailers are so strong that there will be among the landscape with help from those from Amazon. Now even though I admired. Jeff. I've admired him for a long long time and and.
[00:16:52] And watch what he was doing. But I did not think that he could succeed on the scale he has and I certainly didn't even think about the possibility of.
[00:17:01] Doing doing anything but Amazon Web Services or the cloud. So if you'd asked me the chances that while he was building up the retail operation that he would also be doing something that. Was disrupting the tech industry. You know that would have been a very very long shot for me and I underestimated really underestimate the brilliance of the execution. I mean one thing to dream about doing this stuff online but. It takes a lot of ability and. You know you can read his 1997 annual report and he laid out a road map. And he's done it and done it in spades. And if you haven't seen his interview on. Charlie Rose. Three or four months ago Charlie Rose dotcom go to NASA and do it because you learn a lot at least I did. I just I just point it always looked. Expensive but I really never thought that. He would be where he is today. I thought he would do. That. He was really brilliant. But I did not think he would be where he is today. When I looked at it. 3 5 8 12 years ago whatever it may have been. Charlie how did you miss it.
[00:18:23] It was easy. What.
[00:18:27] Was done there was very difficult. And it was not at all obvious that it was all going to work as well as it did. I don't feel any regret about missing out on the achievement of Keyvan so Amazon but other things were easier and I think we we screwed it up a little.
[00:18:50] No we won't pursue that line. I meant Google.
[00:18:59] We missed a lot of things. Yes we've missed a lot of things and we'll keep doing it. And what can we do as everything more. That's our secret. We don't more.
[00:19:17] OK we've got to move on. I think.
[00:19:23] He started getting specific. Carol.